In 1940, Congress created the Civil Aeronautics Board (CAB). Its responsibilities included establishment of airline safety regulations and to monitor and enforce compliance. Another responsibility was economic regulation of the airlines. The CAB controlled airline competition in order to ensure the airlines' economic health. Airlines need to be profitable in order to buy new airplanes from time to time, pay salaries that will attract competent air crew and maintenance personnel; and to perform proper maintenance and training.
In 1958, Congress took responsibility for airline safety away from the CAB and gave it to the new Federal Aviation Administration (FAA). The CAB retained responsibility for economic regulation. Twenty years later, President Jimmy Carter signed the Airline Deregulation Act of 1978. It gradually phased out economic regulation of the airlines over a period of years. The CAB went out of existence in 1984. What got deregulated were egomania, incompetence, and greed. At Braniff, Harding Lawrence ignored advice to expand cautiously and bought aircraft he couldn't fill. At Northwest, which had been virtually debt-free for years under Donald Nyrop, opportunists engineered a leveraged buyout that saddled the airline with billions of dollars of debt. At American Airlines, Robert Crandall bought hundreds of new airplanes and established hubs that required many passengers to change planes. When American faltered, Crandall blamed labor.
Frank Lorenzo ran an airline empire that included Eastern Airlines, Continental, and Texas Air. He forced Eastern to sell its reservation system to Texas Air for a $100 million, 6% note to be repaid in 25 years. Texas Air then leased the reservation system back to Eastern for $10 million per month. Do the math. That transaction would have amounted to a net transfer of $2.75 billion from Eastern to Texas Air and no benefit to Eastern. This arrangement constituted nothing less than looting. In 1991 however, Eastern, which had once employed more than 40,000 people, went out of business. Freddie Laker's upstart airline forced established carriers such as Pan Am to engage him in a fare war that grounded Laker and mortally wounded the established companies.
There was an explosion of the number of airlines. Uncontrolled competition drove airline fares and profits down; forcing airlines to slash spending for maintenance and training. Airliners that had previously served many cities were replaced by smaller commuter aircraft flown by less-experienced pilots. Non-stop flights were replaced by flights that required passengers to change planes at hubs like Chicago and Atlanta. The airlines cut salaries, benefits, maintenance, and training. Before deregulation, there were twelve major U.S. airlines and there had not been a major airline bankruptcy for twenty-seven years. Since deregulation, three of the twelve major U.S. airlines went bankrupt and the rest were forced to merge to survive. As of 2005, the General Accounting Office (GAO) reported that:
"We found that bankruptcy has been endemic to the airline industry since deregulation, with 162 bankruptcy filings since 1978."
"Bankruptcy Has Been Used to Terminate Defined Benefit Pension Plans."
Thousands or tens of thousands of employees saw their pay, pensions, and medical benefits slashed; or lost their jobs because of the misguided policies of others. Today, there are only three major U.S. passenger air carriers that fly large airplanes; American, Delta, and United. Deregulation has forced airlines to maximize load factors and minimize amenities. On some coast-to-coast flights, meals are neither provided nor available. Few, if any, people who flew as passengers before deregulation think that air travel has improved as a result of deregulation.
Economic chaos was not the only consequence of airline deregulation. Airliners were operated years longer than anyone had ever anticipated and the spending on maintenance and training was reduced. Inevitably, that state of affairs led to disaster. On December 8, 1963, the center-wing fuel tank of a Boeing 707 (Pan American 214) blew up. All 81 people on board were killed. After the accident investigation, director of the CAB safety bureau wrote to the FAA. One of his recommendations was that fuel-tank inerting systems be installed on all airliners. The FAA decided that the risk of explosion did not justify the cost. In 1977, a U.S. Navy report cited failures of the Poly-X wiring insulation used on some Navy fighters. By 1981, problems with wiring insulation had led to the crash of several Navy fighters. Poly-X was also used on Boeing 747 aircraft but there was poor communication between the Navy and the FAA and no remedial action was mandated. In 1979, a version of the Boeing 747 known as the E-4 went into service with the United States Air Force. The Air Force discovered that, under certain conditions, fuel in the center-wing tank got so hot that it vaporized. The Air Force complained to Boeing and Boeing provided four volumes of procedures to reduce the fuel heating. That information was never communicated to the airlines. On July 17, 1996, the center-wing fuel tank of a Boeing 747 (TWA 800) blew up twelve minutes after takeoff from Kennedy International Airport in NY (JFK). All 230 people on board were killed. They plunged into the ocean from 2 ½ miles up. The airplane had flown 93,303 hours during 16,868 flights. It had averaged almost two flights a day, every day, for 24 years. Because of TWA's precarious financial condition resulting from deregulation, they operated the airplane years longer than they had ever anticipated and had not been able to spend more on maintenance than the minimum required by inadequate regulations. Those factors, along with a long-ignored hazards, were responsible for the tragedy.
On Aug. 23, 2000, the National Transportation Safety Board issued its official accident report. It states,
"According to a list prepared by the FAA, since 1959 there have been at least 26 documented fuel tank explosions/fires in military and civilian transport-category airplanes (including TWA flight 800)."
Such are the consequences of inadequate regulation, oversight, and enforcement.
During my late-night research, I might have copied text from another author and inadvertently forgotten to give credit. Please let me know if you find instances of such negligence and I will correct it promptly. I welcome all corrections of facts, spellings, grammar and broken links.